Ethics and The Accounting Profession

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Accounting professionals are bound to adhere to the rules of the organizations and professional standards of the accounting industry. Accountants have ethical responsibilities to different parties, both internal and external to the company, including clients, shareholders, firm, and company. The governing body of accounting, the AICPA, has established a set of principles outlining the major ethical responsibilities to which accountants should stick to in order to maintain their CPA licenses.

The ethical responsibilities of accountants are very important considering the financial implications of ethical failures, poor judgments, or intentional or unintentional sharing of the client’s financial information can have significant consequences for all parties. The aftermath of violation of CPA ethics and CPA ethical standards ranges from the accounting firm losing the business to a CPA losing their job to criminal prosecution.

Organizing and helping to manage an organization’s or an individual’s finances comes with a correspondingly high demand for trust, and accountants are entrusted with this huge responsibility. It is very clear that all accounting professionals must give paramount importance to maintaining ethical responsibilities.

Ethical Responsibilities of Accountants

The American Institute of CPAs (AICPA) and the International Ethics Standards Board for Accountants (IESBA) both stipulated a CPA code of ethics, addressing numerous standards of ethical behavior in the accounting profession. The IESBA establishes five key ethical principles for accountants. These are:

  • Integrity: To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.
  • Objectivity: A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.
  • Professional competence and due care: A member should observe the profession's technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member's ability.
  • Confidentiality: The accountant has to be the main guardian of sensitive financial information, trade secrets, intellectual property, employee details, distribution lists etc.
  • Professional behavior: Professional behavior is expected from an accountant in meeting prescribed deadlines, providing advice, compiling reports, and extending his co-operation whenever necessary. He needs to remain humble yet persuasive and assertive

The AICPA Code of Professional Conduct, like the IESBA Code of Ethics, addresses these and other accounting and ethical issues in detail. Summarizing the principles of CPA ethics, it can be concluded that accounting professionals must commit to work at the highest level of their technical competency, not using or sharing confidential information for personal gains or for the benefit of other party and avoiding conflict of interest.

There are a number of courses offered by firms, related to CPA ethics, for professional accountants, those who are preparing for CPA exams to become certified public accountants, and those looking to meet AICPA’s CPE requirements, on topics such as maintaining professional ethics in a culture of oversharing, trends and proposed changes to ethics interpretations, and government ethics and independence.

Ethical Issues and Situations Accountants Encounter

Ethical mistakes and failures often arise from perceived time constraints, be it signing an important document that hasn’t been reviewed properly or intentionally overlooking a potential conflict of interest between an accountant and a client. When people do not follow CPA ethics best practices due to a shortage of time or working with a tight deadline, they feel pressured and sometimes take shortcuts, resulting in poor decisions, endangering their career, and the success of their firm.

Accountants can avoid this situation by raising red flags early about a potential ethical issue. In case of having any concern, raising the red flag as soon as possible can save accountants from taking shortcuts and bad decisions. Times constraints aren’t behind all bad decisions. A wish to gain financial benefits on confidential information or exercise influence sometimes leads to a violation of the public trust.

Accounting firms, by conducting regular internal ethics trainings for their staff, can reinforce a culture of ethical behavior and emphasize the adherence to CPA ethical standards as the firm’s top priority. Some larger accounting firms maintain ethics hotlines where employees can call and report suspected unethical behavior.

To stay up-to-date with the trends, laws, and regulatory changes, and best practices, accountants need to prioritize ethics CPE. It can promote the overall ethical behavior in the accounting profession and keep the profession respected and trusted.

CPA designations in the U.S. are issued at the state level. Therefore, Certified Public Accountants need to comply with the standards and requirements set out by the state in which they are registered. NASBA serves the interests of state-level boards, whereas, AICPA serves the interest of individual CPAs. The training requirements vary state to state but one of the general requirements is taking an ethics course every year which in some cases must pertain to the specific ethics requirements of the relevant state board of public accountancy.

The Virginia Board of Accountancy (VBOA), on May 21, 2020, intended to approve more options for the Virginia-Specific Ethics Course beginning with the 2021 course. The two-hour annual requirement will remain the same for all Virginia CPAs. All licensees will still need to complete a VBOA-approved ethics course annually that complies with VBOA regulation 18VAC5-22-90.

The Virginia Board of Accountancy will continue to approve all sponsors and courses before time and the CPAs have to choose an ethics course from a VBOA approved sponsor. The approved ethics course sponsors are listed on the VBOA website. All Virginia CPAs must take the one approved Virginia-Specific Ethics Course from an approved provider.